Case Study: Grab and the Competition Act 2010

By Bryan Boo

 

Recently, the Malaysia Competition Commission (“MyCC“) proposed to fine Grab RM 86 million for abusive practices infringing section 10 of the Competition Act 2010 (“the Act”). The grounds of this proposal is that Grab had imposed restrictive clauses which, in the view of MyCC, distorts competition in the relevant market.

 

  1. Abuse of dominant position is prohibited

(1) An enterprise is prohibited from engaging, whether independently or collectively, in any conduct which amounts to an abuse of a dominant position in any market for goods or services.

(2) Without prejudice to the generality of subsection (1), an abuse of a dominant position may include—

(a) directly or indirectly imposing unfair purchase or selling price or other unfair trading condition on any supplier or customer;

(b) limiting or controlling—

(i) production;

 (ii) market outlets or market access;

 (iii) technical or technological development; or

 (iv) investment,

to the prejudice of consumers;

(c) refusing to supply to a particular enterprise or group or category of enterprises;

(d) applying different conditions to equivalent transactions with other trading parties to an extent that may—

(i) discourage new market entry or expansion or investment by an existing competitor;

(ii) force from the market or otherwise seriously damage an existing competitor which is no less efficient than the enterprise in a dominant position; or

(iii) harm competition in any market in which the dominant enterprise is participating or in any upstream or downstream market;

(e) making the conclusion of contract subject to acceptance by other parties of supplementary conditions which by their nature or according to commercial usage have no connection with the subject matter of the contract;

(f) any predatory behaviour towards competitors; or

(g) buying up a scarce supply of intermediate goods or resources required by a competitor, in circumstances where the enterprise in a dominant position does not have a reasonable commercial justification for buying up the intermediate goods or resources to meet its own needs.

(3) This section does not prohibit an enterprise in a dominant position from taking any step which has reasonable commercial justification or represents a reasonable commercial response to the market entry or market conduct of a competitor.

(4) The fact that the market share of any enterprise is above or below any particular level shall not in itself be regarded as conclusive as to whether that enterprise occupies, or does not occupy, a dominant position in that market.

 

The question then is, what does the Act mean by “dominant position”? Dominant position is defined in section 2 of the Act.

 

“dominant position” means a situation in which one or more enterprises possess such significant power in a market to adjust prices or outputs or trading terms, without effective constraint from competitors or potential competitors;

 

It must be noted that being in a dominant position does not fall foul of the Act. It is only when a business or company abuses that dominant position that it infringes Section 10 of the Act.

Under Section 36 of the Act, the business or company concerned may make representations to MyCC with regards to the proposed decision. In the instant case, Grab has 30 days from the date of receipt of the proposed decision to make their representations. Grab would have to represent to MyCC that they had not infringed section 10 of the Act or justify that the situation falls under one of the exceptions under the Act, such as Section 10(3), which allows businesses and companies in a dominant position to take any step which has reasonable commercial justification or represents a reasonable commercial response to the market entry or market conduct of a competitor.

 

While the case of Grab is regarding a company occupying a dominant position in which decisions easily affect the market, it must also be noted that smaller businesses and companies do not escape the Act.

Section 4 of the Act provides that agreements between businesses and/or companies might also fall foul of the Act if the object of the agreement is to, for example, fix a purchase or selling price or any other trading conditions, limit or control production or investment, or even performing an act of bid rigging. In this respect, it is also possible for smaller businesses and/or companies to infringe the provisions of the Act.

Conclusion

In view that MyCC has the power under the Act to impose large financial penalties, it is therefore suggested that businesses and companies should regularly assess its own competition law risks and ensure compliance.

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